Procurement and Sourcing Models
It is believed that procurement of goods and services has traditionally involved high transaction costs. The cost of finding and qualifying potential bidders has been particularly high. The advent of electronic commerce, however, has introduced new methods of procurement that lower some of the transaction costs associated with procurement. Electronic procurement, and in particular business-to-business electronic procurement, matches buyers and suppliers and facilitates transactions that take place on networked systems.
Supplier-bidding auctions for products and services defined by a buyer have been developed. In a supplier-bidding auction, bid prices may start high and move downward in reverse-auction format as suppliers interact to establish a closing price. The auction marketplace is often one-sided, i.e., one buyer and many potential suppliers. It is believed that, typically, the products being purchased are components or materials. “Components” may mean fabricated tangible pieces or parts that become part of assemblies of durable products. Example components include gears, bearings, appliance shelves, or door handles. “Materials” may mean bulk quantities of raw materials that are further transformed into product. Example materials include corn syrup or sheet steel.
Industrial buyers may not purchase one component at a time. Rather, they may purchase whole families of similar components in order to achieve economic means of scale. These items may therefore be grouped into a single lot. Suppliers in industrial auctions may provide unit price quotes for all line items in a lot.
Auction Process
In many types of business transactions, price may not be the sole parameter upon which a decision is made. For example, in the negotiations for a supply contract, a buyer may compare various proposals not only on the basis of price but also on the basis of the non-price characteristics of non-standard goods, the location of the supplier, the reputation of the supplier, etc. In a typical business-to-business situation, a plurality of parameters or cost components may be considered in combination with the supplier's price proposal.
In these situations, purchasers may negotiate with each supplier independently because multi-parameter bids may not be readily compared. Actual comparisons by the purchaser may be based on a combination of subjective and objective weighting functions. Bidders may not have access to information on the buyer-defined weighting functions. At most, bidders may be selectively informed (at their disadvantage) of aspects of other competing bids.
Thus, it is believed that there is a need for system and method of providing a competitive auction for goods or services that traditionally could not take advantage of natural auction dynamics. In particular, it is believed that there is a need for system and method of providing an auction where a buyer can determine the true cost of procuring a lot having several components from a particular supplier, using the real-time transformation of multi-parameter factors into comparative units of measure.